Playing Defense

Most businesses think of marketing in terms of brand building and capturing new markets. But a smart defensive strategy can be crucial to fending off attacks by rivals.

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Executives at Datastream Systems attend only one or two trade shows a year. The last time the enterprise software company, based in Greenville, South Carolina, advertised in a magazine was in 2002. Yet marketing is at the center of its strategy. That's because Datastream spends nearly all of its marketing dollars playing defense. Let the competition go after new clients with splashy ad campaigns and fancy trade show presentations, says Greg Sutter, Datastream's vice president of marketing. Instead, Sutter takes a different approach: marketing behind the scenes to forge relationships with specific groups--most importantly, existing customers. "To defend our position, we don't go wide, we go deep," Sutter says.

Marketing is usually understood to mean building brands and capturing new markets. And it's often discussed in terms of sexy campaigns. But in the quest to make an impression, many companies ignore defensive strategies, which can be far more effective in warding off rivals, says John H. Roberts, a professor at the Australian Graduate School of Management and London Business School and author of an article on the topic recently published in the Harvard Business Review. Defensive tactics make sense in a variety of situations, but they become critical when a company is under attack. A strong defense is especially important today as technology and globalization lower barriers to entry, leaving industry leaders vulnerable. "In times of turbulence, relationships and behaviors are loosened up and the glue that holds customers to one's product is weakest," Roberts says. A smart defense, he adds, is especially crucial for smaller companies, whose survival often depends on preserving relationships and guarding a niche. What's more, small companies typically have limited marketing budgets, and a defensive campaign often provides more bang for the buck.

In general, it's wise to deploy defensive tactics as soon as rivals appear on the radar. Datastream thrived almost from the moment it was founded in 1986. By 2000, annual sales at the company -- which specializes in what is called asset-management software, which helps municipalities and corporations manage items such as dump trucks and sewer lines -- reached $90 million. But as sales grew, so did the competition. A few years ago, software giants SAP and Oracle began marketing their own asset-management software. Their tactics were aggressive, with major campaigns in industry publications and well-financed trade show appearances. In some cases, they even gave away software to win customers. "They had deep pockets and they were coming for our space," Sutter says.

Datastream's executives knew they could never win a price war with larger rivals or compete with their huge marketing budgets. Instead, they decided to rethink their own marketing approach. The idea was to forget widespread brand building and instead leverage the company's nimble structure and knack for building relationships. Datastream ditched the usual trade shows and print ads. Sutter now focuses his efforts on specific divisions, and even offices, within government agencies and corporations, targeting both current and potential customers by holding regular one-hour Web seminars. He recently hosted an online presentation for wastewater operations managers of city governments. The 100 managers who logged on watched a short presentation, took a test drive of the software, and participated in a Q&A session.

Sutter also altered Datastream's website to ensure top search engine rankings, changing the site's content to emphasize the company's industry-specific software. Now, if a city manager, say, types in the words "asset management software for wastewater operations" a link to Datastream's site pops up first, giving it an edge over Oracle and SAP, which offer more broad-based applications. So far, the strategy has paid off. Despite intense competition, sales of Datastream 7i, the company's flagship product, jumped 15 percent last year, according to Sutter. And the company's overall marketing budget has stayed the same.

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